We need fewer “pro-business” politicians. There, I said it.
Not fewer “pro-market” pols, mind you. Not at all: We need more people in government who understand and promote policies that open markets to competition and keep them out of the grip of unnecessary regulation.
We need them to understand that, too often, being “pro-business” means favoring policies that favor one business over another — and over consumers and taxpayers to boot. Few issues illustrate that better than the debate over whether Congress should reauthorize the Export-Import Bank.
The bank subsidizes U.S. exports primarily through loans or loan guarantees to overseas buyers of American goods. The idea is that many companies, particularly if they’re small firms located in non-Western countries, don’t have access to the kind of credit markets American firms do. They wouldn’t be able to buy U.S. goods without the bank, the thinking goes, and Ex-Im credit boosts small businesses abroad and at home.
If that sounds good, consider the top beneficiaries of Ex-Im subsidies — to the tune of tens of billions of dollars over the years — are large airlines, often state-owned and heavily subsidized, buying wide-body aircraft from a little ol’ company called Boeing. Which brings us to a local company that views this arrangement as not exactly pro-market.
Delta Air Lines has emerged as perhaps the leading corporate voice against the way the Ex-Im Bank does business. While the Atlanta-based company doesn’t oppose reauthorizing the bank entirely, it makes a strong economic case that U.S. taxpayers are subsidizing foreign airlines to the detriment of our own.
Delta believes Ex-Im loan guarantees are worth as much as $20 million per wide-body airplane, such as the Boeing 777s and 787s used on lucrative international flights. That, Delta CEO Richard Anderson testified before Congress in June, means airlines financing deals with Boeing via Ex-Im credit are “essentially getting a free additional wide-body plane for every eight new planes it buys.”
The $20 million figure is based on Delta’s analysis of two aircraft purchases by Emirates Airline in June 2012: one on the private market, and one backed by Ex-Im which resulted in interest-rate savings of almost 2.5 percentage points. The mere fact Emirates (and other carriers) can finance one aircraft purchase without subsidies ought to be a clear sign it doesn’t need subsidies for other transactions.
While Delta’s focus is limited to the bank’s dealings with airlines, I’ll go a step further and agree with this broader statement from a 2011 Cato Institute research paper opposing re-authorization, period:
“Either a transaction is relatively creditworthy — in which case a private financial services provider could be expected to step in — or it is not. And if it is not, then the bank would be putting taxpayer dollars at unacceptable risk by financing it.”
Ex-Im’s business as usual means not supporting the market, but being for some businesses over others.
